From Stockwatch
SouthernEra Resources Limited SUF
Shares issued 26,885,895 Oct 29 close $2.18
Fri 29 Oct 99 Street Wire
Also Caldera Resources Inc (CDR)
SOUTHERNERA TO LOOK DOWN UNDER WITH CALDERA
by Will Purcell
Caldera Resources Ltd. and SouthernEra Resources Ltd. recently announced
that they have teamed up to search for diamonds in the state of Western
Australia. For SouthernEra, a company with far flung interests now
stretching across four continents, and a flagging stock, the deal
represents its first foray into Australia. Caldera, on the other hand, has
been active in the search for down under ice for several years.
Under the terms of the joint venture, SouthernEra can earn a 51-per-cent
interest in the property, by spending $1-million in exploration over the
next four years, and can increase its interest to 70 per cent by spending a
further $4-million over the following two years. The property was recently
jointly acquired by the joint venture, and is approximately 900 square
kilometres in area. The acquisition remains surrounded in secrecy, and
neither partner appears willing to disclose much information about the
property itself.
Caldera spokesman, Jason Shepherd, said that the property was "a brand new
acquisition", and not part of Caldera's current land position. He said the
property was acquired about two months ago, but its location "remains top
secret for particular reasons". Mr. Shepherd said that the location of the
property would be revealed in due time, but was unable to estimate when
that might be possible.
Lee Barker, SouthernEra vice-president, confirmed the reluctance of the
joint venture to identify the location of the property. He said they would
be conducting a regional exploration program, and they did not want to draw
attention to the area, which might "jeopardize future possibilities. Mr.
Barker said that SouthernEra had "looked at a lot of opportunities in
Australia", and described the Caldera deal as "an interesting project". He
said that the area had been worked by others in the past, but described the
play as "embryonic at this point", and added that SouthernEra liked the
opportunity that Caldera brought to the table. Mr. Barker indicated that a
traditional exploration program was in the works, including sampling for
indicator minerals and possibly survey work.
Mr. Shepherd acknowledged that the deal was a good one from Caldera's point
of view, but he said that SouthernEra had conducted a significant amount of
due diligence on the property, and he felt that they "must see long term
potential". Mr. Shepherd described SouthernEra as an exploration company
with diverse interests, and he added, "You have to put your feet in the
right tubs of water; you have to go where the diamonds are."
The question remains whether the right tubs of water, or the diamonds, will
be found in Australia. The continent is a significant diamond producer, but
the vast majority of Australian diamonds come from one mine, the well known
Argyle operated by Ashton Mining Ltd. and Rio Tinto, and most of its
production consists of low valued industrial grade stones. For several
years, over 40 million carats were produced from the Argyle annually, with
an average value of $9 (U.S.) per carat, although production is now
beginning to taper off. Australia has recently become home to another
producing mine, as Ashton Mining Ltd. has succeeded in bringing its
Northern Territory Merlin project to production. Merlin was originally
discovered in the mid 1980s, and the project now consists of 12 closely
spaced diamondiferous pipes with Arthurian names, with four of these
currently part of the mine plan; the Launfal, Excalibur, Sacramore, and
Palomides. Bulk sampling had indicated grades on the Merlin pipes ranging
from 0.08 to 1.3 carats per tonne, and diamond values varying from $41
(U.S.) to $140 (U.S.) per carat. The mine produced just under 40,000 carats
in its first four months of operation, and projections are that it may
ultimately achieve production of up to 300,000 carats annually. The mining
grades appear to average 0.3 carats per tonne from the four pipes, and the
first sale netted an average of $128 (U.S.) per carat. While Australia
certainly has producing diamond mines, the island to date appears rather
reluctant to offer them up to companies other than Ashton.
Caldera's exploration of Australia began in the mid 1990s, through a
private company, Caldera Resources N.L. of Australia. In 1995, Caldera and
Australian Diamondex Inc. engineered a reverse takeover of the Canadian
junior, Bishop Resources International Exploration Inc., and appropriately
renamed the company Caldera Resources Ltd. Prior to the reverse takeover,
Bishop had been active in the resource sector under various names for over
40 years, but with little success. The company had been inactive for some
time, but the Caldera acquisition was to change that with the addition of a
mining property, and a ready supply of working capital.
The primary project of Caldera was the Abminga diamond prospect, located in
one of the most remote areas of central Australia, in the northern portion
of Southern Territory near the centre of the continent, about 300
kilometres south of Alice Springs. In 1995, Caldera formed a joint venture
with Mount Isa Mines Ltd. (MIM) to explore Abminga. Under the terms of the
deal, MIM could earn a 50-per-cent interest in two exploration licences by
spending $4-million (Australian) on the property. Late in 1995, MIM
conducted an 18 hole drill program that tested 12 targets on the two
properties. As well, Caldera drilled 11 holes into five targets the
following year, including target 150, which apparently yielded two small
macrodiamonds. MIM believed their results to be negative and subsequently
withdrew from the joint venture. Nevertheless, Caldera continued to believe
the property held promise, based on kimberlite indicator minerals, and the
identification of possible pyroclastic rock.
In 1997, Caldera tried again. A total of 23 holes were drilled into six
anomalies, and over 120 tonnes of sample was collected, approximately half
of which was sent to Perth for processing. The material was described as
tuff, microbreccia, or disaggregated kimberlite, and processing revealed
high concentrations of indicator minerals, which suggested the rock had a
kimberlitic origin. Early in 1998, Caldera attracted another joint venture
partner for the Abminga project. Astro Mining N.L. of Australia agreed to
spend $16-million (Australian) to earn a 60-per-cent stake in the project,
subject to a six-month due diligence program.
Astro re-evaluated the existing work, processed 2,008 kilograms of reverse
circulation drill cuttings from Caldera's 1997 program, and conducted its
own drill program. The three Astro holes did not encounter anything
encouraging, and the sample processing also failed to yield anything
positive whatsoever. Astro concluded that its work had failed to encounter
diamonds, kimberlite, or even kimberlite indicator minerals. As a result,
Astro declined to participate further.
Caldera continues to hold out hope for the Abminga prospect, but the
expenditure of well over $2-million has failed to discover a solitary
diatreme kimberlite pipe, and over 10,000 metres of drilling and an
extensive sampling program has apparently yielded only two small
macrodiamonds. The company has stated the property is similar to the Fort a
la Corne region of central Saskatchewan, where Cameco Corp. Kensington
Resources, Uranerz, and Monopros Ltd. have conducted an exploration program
for more than a decade with disappointing results.
Late in 1998, Caldera acquired the assets of Remington Resources N.L.
through a takeover bid for the private concern. The deal was approved by
both companies, which was not surprising as they shared the same
principals. The chairman and president of Caldera, John Daniels and
Christopher Reindler, were also controlling shareholders and part of
Remington's management team. With the deal approved, Caldera issued
12,756,252 shares to the shareholders of Remington, which amounted to a 67
per cent increase in the number of shares outstanding.
Caldera acquired a number of additional Australian diamond prospects
through the deal. Mr. Shepherd said that the deal was consummated because
the management of Caldera recognized the danger of having just one
principal exploration property, and chose to diversify its holdings. The
properties acquired by Caldera are principally in western Australia, and
had not been subjected to a significant exploration program. Of all the
properties acquired by Caldera, The Tabletop project area, about 450
kilometres east-northeast of Newman, was initially believed to have the
greatest chance for success, and Caldera was successful in attracting a
joint venture partner for the Tabletop East properties.
Stockdale Prospecting Ltd., a subsidiary of De Beers, can acquire a
51-per-cent interest by spending $1-million (Australian) within three
years, and may increase its interest to 75 per cent by spending a further
$4-million (Australian) in the following two years. Stockdale promptly
completed a detailed aeromagnetic survey over seven anomalies, and
identified four targets for a sampling program. A total of 120 kilograms of
samples were collected from each site and processing for indicator minerals
is under way. Meanwhile, Caldera continues to explore the remainder of the
Tabletop area on its own, conducting surveys, and taking loam samples. The
company apparently plans to drill test up to 10 targets with two holes each
to 100 metres or more. The hopes for the property rose somewhat when
Caldera announced, early in September, that a four kilogram sample from one
anomaly had contained a microdiamond.
The Gunanya prospect has also attracted the interest of the De Beers
subsidiary. Stockdale can earn a 51-per-cent interest in the property, with
a further option to increase its stake to 75 per cent under terms similar
to the Tabletop East agreement. Stockdale reviewed the existing data, and
identified three targets worthy of a closer look. A sampling program was
completed this summer, and 120 kilograms of sample from each target are
currently being processed at Stockdale's Perth facility. Meanwhile, the
joint venture recently scored a modest success when Caldera processed a
three-kilogram sample taken from one anomaly and recovered a microdiamond,
and subsequent testing of the same anomaly yielded a second micro a few
days later. Interestingly, the same anomaly had been explored by another
company during 1992, and the target had yielded two microdiamonds during a
1994 exploration program. No drill testing was undertaken on the anomaly,
however, and as a result, the company believes this target represents a
high priority drill prospect.
Caldera has two additional diamond prospects in western Australia. The
Bobbymia project is about 100 kilometres to the west of the Gunanya play,
and a detailed aeromagnetic survey confirmed several anomalies suitable for
a drilling program. As well, the Rason project, in the Great Victoria
Desert about 400 kilometres northeast of Kalgoorlie, is in the early stages
of exploration. The company also has a base metal play, located about 40
kilometres northwest of Oodnadatta. Caldera does not plan to explore for
base metals or gold, and is therefore seeking a joint venture partner for
the prospect.
Caldera began trading late in 1995 in the $1.50 range, but dipped to as low
as 35 cents during the summer of 1996. Caldera shares rallied to an all
time high of $1.85 in March of 1997, as the company raised $2.1-million
through a special warrant offering and began to more aggressively explore
its Australian property. From the high water mark, Caldera shares began to
slide as investors cooled to Canadian resource companies and Australian
diamonds. The stock reached a low of six cents during the fall of 1998 and
winter of 1999. While the Remington deal did nothing to renew investor
interest, the arrival of Stockdale as a joint venture partner certainly
did, and Caldera shares rallied to 38 cents in heavy trading on the news.
The interest was relatively short lived however, and the company stock
declined in price to seven cents by early August. News of the microdiamond
recoveries perked up interest once again, and Caldera reached 20 cents in
mid-September. The stock closed Thursday at 10 cents, down three cents on
the day.
Caldera has committed itself to Australian diamonds for the past several
years, but has produced comparatively little for its efforts to date, and
has a total market capitalization of only $3.4-million as a result.
Nevertheless, the company has now attracted joint venture partners with
well respected names for three of its properties. As well, the company
plans to commit its own funds to the exploration of its other properties.
Mr. Shepherd said that Caldera planned to spend about $250,000 in
exploration this year on properties not part of the joint venture
agreements.
The recent deal with SouthernEra appears to have attracted little market
interest to date, despite the level of secrecy which surrounds the property
acquisition by the joint venture. Indeed, both Caldera and its partner's
shares drifted lower in the days following the news. SouthernEra reached an
intraday low Thursday of $2.15, as an increasing number of shareholders now
believe their company has its feet in too many tubs of water around the
world. Regardless, the deal is an intriguing one. Mr. Barker was hopeful
that the Australian venture would pay off, stating that SouthernEra "would
like to have our shot at it." The company believes the recently acquired
property displays strong similarities to the Lac de Gras region of Canada's
Northwest Territories, which is certainly a far better comparison than one
to the Fort a la Corne region. Caldera shareholders can only hope that
there is some validity to the geological comparison with an area that has
produced many kimberlites with economic potential.
(c) Copyright 1999 Canjex Publishing Ltd. canada-stockwatch.com
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